Home buying and refinancing are good for mortgage brokers, who match borrowers with loans. Less buying and refinancing is bad.
A 21/2-year housing slump paired with increasingly restrictive borrowing rules and a shift to lenders handling more of their own loans? Very bad.
"Each week it's harder," said Charles J. DiPino, co-owner of Universal Trust Mortgage in Columbia, which is fighting to keep business level. "Mortgage brokers are facing an extreme uphill battle."
Just under 6,700 Baltimore-area homes changed hands in the first four months of the year, about half the number at the same time in 2005, the last year of the housing boom. Prices have been falling, which makes it harder for homeowners to refinance. And lenders, stung by rapidly rising foreclosures of loans made in the easy-money boom days, have been cutting mortgage products and adding restrictions at a frenetic pace.
Some of those changes are specifically targeting mortgage brokers, who have taken heat nationally for their role in the lax lending practices that put too many borrowers into loans they couldn't afford and in some cases didn't understand.
Brokers are a go-between, comparing terms and connecting people with loans offered by banks or mortgage companies. But some big lenders have decided to stop taking loans handled by brokers. Bank of America got out of the business Jan. 1. National City said the next day that it had shut its wholesale arm, too. Washington Mutual is in the process of following suit now.
That is likely to escalate a trend that started last year, when the share of U.S. mortgages handled in-house by lenders rose from 39 percent at the beginning of 2007 to 49 percent at year-end, according to Inside Mortgage Finance, a Bethesda-based weekly newsletter. The increase came at the expense of brokers and "correspondents," who, unlike brokers, close loans on their own and then immediately resell to a lender. Many brokers can also act as correspondents, said Guy Cecala, publisher of Inside Mortgage Finance .
"Both those businesses have fallen off dramatically," he said, noting that this isn't typical. "In past downturns in the mortgage market, lenders have been quick to close down their own branches, which tend to be more expensive, and shift more business to mortgage brokers."
